May 22 (Bloomberg) — U.S. inflation-indexed bonds are outperforming Treasuries this year, recovering from unprecedented losses in 2013, even as consumer prices have stayed in check through the sluggish U.S. economic recovery of the past five years.
Fixed-rate securities fell after a report showed existing- home sales in the U.S. increased in April for the first time this year. The U.S. will sell $13 billion of Treasury Inflation Protected Securities at 1 p.m. The debt has returned 5 percent in 2014, versus 3 percent for conventional securities, according to Bank of America Merrill Lynch indexes.
"TIPS look attractive versus nominals," said Stanley Sun, a New York-based strategist at Nomura Holdings Inc., one of 22 primary dealers that trade with the Federal Reserve, said in a phone interview. 'They have done well this year because of the broader rally in Treasuries, but they are still cheap.''
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The difference between yields on 10-year notes and same-maturity TIPS, a gauge of trader expectations for consumer prices over the life of the debt known as the break-even rate, was 2.17 percentage points. The average for the past decade is 2.21 percentage points.
Conventional U.S. 10-year note yields rose one basis point, or 0.01 percentage point, to 2.55 percent at 10:57 a.m. New York time, based on Bloomberg Bond Trader data. Earlier they climbed to 2.57 percent, the highest since May 14.
U.S. Economy
Closings on previously owned U.S. homes, which usually take place a month or two after a contract is signed, increased 1.3 percent to a 4.65 million annual rate, the National Association of Realtors reported. Economists surveyed by Bloomberg projected a 4.69 million pace. The number of homes for sale jumped 16.8 percent in April.
Bonds pared losses earlier after the Labor Department reported that initial claims for jobless benefits increased by 28,000 to 326,000 in the week ended May 17. There were 298,000 filings a week earlier, more than initially reported, and the median forecast of 50 economists surveyed by Bloomberg called for a rise to 310,000. Continuing claims fell to the lowest since December 2007.
Treasuries are scheduled to close at 2 p.m. in New York tomorrow and stay shut worldwide on May 26 for Memorial Day in the U.S. and the Spring Bank Holiday in the U.K., according to the Securities Industry and Financial Markets Association.
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